War puts key Iranian oil terminals at risk

Key takeaways:

• Kharg Island is the main outlet for Iranian crude exports and plays a critical role in sustaining the country’s economy.

• Its importance to global oil markets depends on the role of Iranian barrels, which remain constrained by sanctions but still matter at times of tighter supply.

• Targeting the island could severely weaken Iran’s revenues, but it could also trigger wider retaliation against energy infrastructure in the region.

• The greatest short term risk is not only the loss of Iranian exports, but the possibility of broader attacks that push oil prices even higher.

• In the longer term, damaging this export route could also deprive any future Iranian government of a major source of recovery revenue.

• China would be the most directly affected buyer because it has been the main destination for Iranian crude exports in recent years.

• The attraction of sanctioned Iranian oil lies in the discounted prices it offers, not in a lack of oil supply in the global market.

• Losing access to these discounted barrels would force buyers such as China to turn to alternative supplies at higher prices.